EXCELSIOR CAPITAL LTD — Capital/Financing Update 2017

Jan 18, 2017

SUPPLEMENTARY PROSPECTUS

CMI LIMITED (ACN 050 542 553)

TO BE RENAMED EXCELSIOR CAPITAL LIMITED

1 IMPORTANT NOTICE

This Supplementary Prospectus is dated 16 December 2016 and was lodged with the Australian Securities and Investments Commission ( ASIC ) on that date ( Supplementary Prospectus ). This Supplementary Prospectus supplements the prospectus dated 18 November 2016 issued by CMI Limited (to be renamed Excelsior Capital Limited) (the Company ) and lodged with ASIC on that date ( Prospectus ).

This Supplementary Prospectus must be read in conjunction with the Prospectus.

ASIC and ASX take no responsibility for the contents of this Supplementary Prospectus or the Prospectus.

Other than as set out below, all details in relation to the Prospectus remain unchanged. Terms and abbreviations defined in the Prospectus have the same meaning in this Supplementary Prospectus. If there is a conflict between the Prospectus and this Supplementary Prospectus, this Supplementary Prospectus will prevail.

This is an important document and should be read in its entirety. If you do not understand it you should consult your professional advisers without delay.

2 REASONS FOR THIS SUPPLEMENTARY PROSPECTUS

The purpose of this Supplementary Prospectus is to provide supplementary disclosure regarding certain matters set out in the Prospectus. The supplementary disclosure is set out below.

3 SECTION 1.8 – MANAGEMENT AGREEMENT AND SUB-MANAGEMENT AGREEMENT

After Section 1.7 on page 8 of the Prospectus, the following Section 1.8 is included:

1.8 Management Agreement and Sub-Management Agreement

Topic	Summary	More Information
What is the term of the Management Agreement and the Sub- Management Agreement?	The initial term of both the Management Agreement and Sub-Management Agreement is five years, commencing on the date that each agreement is executed by the relevant parties. Unless the Management Agreement is terminated earlier in accordance with its terms, the Management Agreement will be automatically extended for a further five year term. Unless the Sub-Management Agreement is terminated earlier in accordance with its terms, the Sub-Management Agreement will be automatically extended with a further five year term.	Please see Section 9.2(a) for further information about the initial term and renewal term of the Management Agreement. Please see Section 9.3(a) for further information about the initial term and renewal term of the Sub-Management Agreement.
How can the Management Agreement be terminated by the Manager?	At any time after the first anniversary of the Management Agreement, the Manager may terminate the Management Agreement with the consent of the Sub-Manager. After the initial term of the Management Agreement, the Manager may terminate the Management Agreement on six months' written notice to the	Please see Section 9.2(m) for further information about how the Management Agreement can be terminated.

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	Company.
How can the Manager be removed by the Company?	On the occurrence of certain events, the Company can remove the Manager on three months' written notice.	Please see Section 9.2(m) for further information regarding removal of the Manager, including the specific events that give rise to the Company's entitlement to remove the Manager.
How can the Sub- Management Agreement be terminated?	During the initial term of the Sub-Management Agreement, the Sub-Management Agreement: • will be terminated immediately on termination of the Management Agreement; • may be terminated by the Manager on 75 days' written notice to the Sub-Manager; • may be terminated immediately by the Sub- Manager on the occurrence of specific events; and • may be terminated immediately by the Manager on the occurrence of specific events.	Please see Section 9.3(n) for further information regarding termination of the Sub- Management Agreement, including the specific events that give rise to termination rights for each of the Manager and Sub- Manager.

4 SECTION 3.1 – OVERVIEW OF COMPANY

After Section 3.1(c) on page 12 of the Prospectus, the following paragraph (d) is included:

(d) Reporting

Following the Change of Business the Company anticipates that, as a listed Investment Entity it will be required under the Listing Rules to separately report certain key information in respect of the Portfolio (which does not include CMI Electrical), including:

• by providing the following information in its annual report:

• a list of all investments held by it and its child entities at the balance date;

• the total number of transactions in securities during the reporting period, together with the total brokerage paid or accrued during that period; and

• the total management fees paid or accrued during the reporting period, together with a summary of any management agreement; and

• within 14 days after the end of each month, tell ASX the net tangible asset backing of its quoted securities as at the end of that month.

However ASX may impose additional or different reporting requirements as a condition of re-listing the Company.

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5 SECTION 3.3 – INVESTMENT MANDATE

After the last paragraph in Section 3.3 on page 15 of the Prospectus, the following additional paragraphs are included:

Any change to the Investment Mandate must be agreed between the Company and the Manager. Any material change to the Investment Mandate or the Investment Strategy (as set out below in section 3.6) will be notified by the Company to Shareholders.

No decisions have been made regarding the following matters, nor will such decisions be made until the Shareholders approve the Change of Business and initial Portfolio investments are proposed that require consideration of those matters:

• the use of leverage, gearing or derivatives by the Portfolio;

• the typical asset classes comprising the Portfolio;

• the location or currency denomination of Portfolio investments; or

• specific guidelines, limits or policies relating to risk management and Portfolio diversification, other than what has been set out in Section 3.3, 3.4 and 3.6 of the Prospectus.

The Company anticipates that any other risk management strategies regarding the Portfolio will be asset specific and will form part of the consideration of any proposed Portfolio investments.

6 SECTION 3.5 – FOUNDATION OF THE COMPANY'S INVESTMENT STRATEGY

The first sentence of Section 3.5 on page 15 of the Prospectus is deleted and replaced with the following:

Glennon Capital believes that having a long-term investment horizon improves operating performance.

7 SECTION 3.6 – INVESTMENT STRATEGY

The third paragraph of Section 3.6 on page 15 of the Prospectus is deleted and replaced with the following:

The Investment Strategy will take a high conviction approach with a flexible mandate. A high conviction approach means that the Portfolio will generally comprise of a fewer number of assets, but each asset will comprise a larger percentage of the overall Portfolio. A flexible mandate means that if a potential acquisition is identified that is outside the sectors where the Company has traditionally invested or operated, then Glennon Capital will have the flexibility to invest the Portfolio in such an opportunity. In addition, the Manager will have the flexibility to invest in sectors that are not in a cyclical decline or that demonstrate better long term investment performance potential than those in which the Company has operated. By way of example only, Glennon Capital may consider investments in small listed companies more attractive for the Portfolio on the basis that such investments may be lower risk than owning 100% of an unlisted company.

Whilst the Portfolio will be concentrated in typically 10-20 securities, Glennon Capital may diversify the Portfolio across industry sectors. Glennon Capital may choose to hold cash while timing entry into investments or if Glennon Capital is unable to find suitably attractive investments at prices that offer appropriate risk-adjusted returns. The level of cash, deposit products and senior debt directly or indirectly held within this limit will be determined by the attractiveness of available securities.

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8 SECTION 4.2 – BUSINESS OF THE GLENNON CAPITAL

The second paragraph of section 4.2 on page 16 of the Prospectus is deleted and replaced with the following:

The Board considers Glennon Capital to have an impressive track record of:

• managing multiple investment portfolios for clients, with a variety of different investment mandates and different investment restrictions and a willingness to manage a single member fund;

• focusing its attention on finding investment opportunities for its clients in small companies; and

• satisfying the criteria required by the Board of its portfolio manager (as set out in Section 3.2(b)).

9 SECTION 9.2 – MANAGEMENT AGREEMENT

Section 9.2(b)(vi) on page 51 of the Prospectus is deleted and replaced with the following:

• (vi) arrange for calculation of the value of the Portfolio at least monthly, with the valuation of the Portfolio's assets to be:

• performed by a qualified valuer independent of the Company and the Manager; and

• in accordance with Australian Accounting Standards (with decisions as to the valuation techniques to be adopted to be made once the Portfolio acquires assets to value other than cash or cash equivalents);

After Section 9.2(b)(viii) on page 51 of the Prospectus, the following paragraph is included:

Paragraph (vi) above notes that valuation of the Portfolio's assets must be in accordance with Australian Accounting Standards. Australian Accounting Standards require that financial instruments be measured at fair value using an exit price at each measurement date. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

• in the principal market for the asset or liability; or

• in the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible by the Company. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. Valuation techniques used will be appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

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At the end of the paragraphs in Section 9.2(m) on page 53 of the Prospectus titled 'Termination by shareholder resolution', the following additional paragraph is included:

Examples of the termination payment payable by the Company to the Manager in different circumstances during the initial five year term are set out in the below table:

GrossValue ofthePortfolio	$20million	$10million	$25million
Termination Percentage	5%	5%	5%
Termination Fee	$1,000,000	$500,000	$1,250,000

As noted above, the Termination Percentage reduces by one sixtieth (1/60) for each whole calendar month that has elapsed after the initial term (i.e. to 4.916% after five years and one month and so on).

At the end of the paragraphs in Section 9.2(m) on page 53 of the Prospectus titled 'Termination by Manager', the following additional paragraph is included:

If the Manager terminates the Management Agreement, no termination fee is payable by the Company to the Manager.

At the end of the paragraphs in Section 9.2(m) on page 53 of the Prospectus titled 'Removal by Company', the following additional paragraph is included:

No termination payment is payable by the Company to the Manager where the Company has removed the Manager as set out above.

10 SECTION 9.3 – SUB-MANAGEMENT AGREEMENT

Section 9.3(b)(vi) on page 54 of the Prospectus is deleted and replaced with the following:

• (vi) arrange for calculation of the value of the Portfolio at least monthly, with the valuation of the Portfolio's assets to be:

• performed by a qualified valuer independent of the Manager and the SubManager; and

• in accordance with Australian Accounting Standards (with decisions as to the valuation techniques to be adopted to be made once the Portfolio acquires assets to value other than cash or cash equivalents);

After Section 9.3(b)(viii) on page 54 of the Prospectus, the following paragraph is inserted:

Paragraph (vi) above notes that valuation of the Portfolio's assets must be in accordance with Australian Accounting Standards. Australian Accounting Standards require that financial instruments be measured at fair value using an exit price at each measurement date. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

• in the principal market for the asset or liability; or

• in the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible by the Company. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. Valuation techniques used will be appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

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At the end of the paragraphs in Section 9.3(n) on page 57 of the Prospectus titled 'Termination payment', the following additional paragraph is included:

Examples of the termination payment payable by the Manager to the Sub-Manager in different circumstances during the initial five year term are set out in the below table:

GrossValue ofthePortfolio	$20million	$10million	$25million
Termination Percentage	5%	5%	5%
Termination Fee	$1,000,000	$500,000	$1,250,000

As noted above, the Termination Percentage reduces by one sixtieth (1/60) for each whole calendar month that has elapsed after the initial term (i.e. to 4.916% after five years and one month and so on).

11 SECTION 9.3A – MANAGEMENT AND SUB-MANAGEMENT FEES

After the end of Section 9.3 on page 57 of the Prospectus, a new Section 9.3A is included as follows:

• 9.3A Management and Sub-Management Fees

Worked examples of the fees payable by:

• the Company to the Manager under Management Agreement; and

• the Manager to the Sub-Manager under the Sub-Management Agreement,

are set out in the table below (including payment of the fixed component management fees and performance fees).

performance fees).
Gross Value of the Portfolio	$20million	$20million	$20million	$20million	$10million	$25million
Fixed component fee per annum payable by Company **to Manager **	$280,000	$280,000	$280,000	$280,000	$280,000	$350,000
Fixed component fee per annum payable by Manager to Sub-Manager	$200,000	$200,000	$200,000	$200,000	$200,000	$250,000
Gross Portfolio Return per annum	10%	7%	3.5%	1%	10%	10%
Benchmark Return (assuming that the RBA *cash rate is 1.5%) **	3.5%	3.5%	3.5%	3.5%	3.5%	3.5%
Performance fee per annum payable by Company to Manager*	$260,000	$140,000	NIL	NIL	$130,000	$325,000
Performance fee per annum payable by Manager to Sub- Manager*	$260,000	$140,000	NIL	NIL	$130,000	$325,000
Total fees per annum payable by Company to Manager*	$540,000	$420,000	$280,000	$280,000	$410,000	$675,000
Total fees per annum payable by Manager to Sub- Manager*	$460,000	$340,000	$200,000	$200,000	$330,000	$575,000
Total fees per annum paid by Company	$540,000	$420,000	$280,000	$280,000	$410,000	$675,000
Total fees per annum **retained by Manager **	$80,000	$80,000	$80,000	$80,000	$80,000	$100,000

*The performance fee will only be paid if the Portfolio's performance exceeds the High Water Mark. The above examples assume that, where the performance fee per annum is greater than $0, the Portfolio's performance exceeds the High Water Mark.

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DIRECTORS' CONSENT

Each of the Directors of CMI Limited has consented to the lodgement of this Supplementary Prospectus with ASIC.

Signed for and on behalf of CMI Limited:

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Leanne Catelan Director Dated: 16 December 2016